Email of the day (1 & 2)
Comment of the Day

October 16 2013

Commentary by Eoin Treacy

Email of the day (1 & 2)

on ETFs for Dividend Aristocrats
“This follows on from the question posted last night, asking if there was an ETF through which Dividend Aristocrats could be bought.

“In fact SPDR ETFs Europe offer two, one for "S&P US Dividend Aristocrats USD", the other based on European Dividend Aristocrats. In fact neither fund pays a particularly generous dividend, and the US fund has been suffering from being denominated in the recently feeble US dollar, but this could be considered a buying opportunity in my view.”


“Re yesterday’s enquiry re a fund for Autonomies. You will probably have already seen this, but if not- on Saturday 12 0ctober there was an article about British Companies records of good dividend payment records and a history of increasing payments. Much of the information seems to have been supplied by a company called SPDR who run a fund comprising 30 of such companies some of whom would also be within your definition of Autonomies. The fund is called UK dividend aristocrats.”

Eoin Treacy's view Thank you both for these informative emails, highlighting increased interest in S&P’s Dividend Aristocrat designation. As veteran subscribers will be aware we have highlighted the attractive attributes of companies with solid records of dividend increases since at least 2010.

Due to the fact that different countries have different traditions of dividend increases, S&P has different criteria for what constitutes an aristocrat in different regions. For example, US companies need to increase dividends for 25 consecutive years while for European companies the hurdle is 10 years and in Asia only 7.

While the majority of such companies tend to achieve this impressive record by managing a conservative dividend policy of small increases and eschewing special dividends, they have obvious attractions in an environment where real yields have often been negative.

The S&P500 Dividend Aristocrats Total Return Index ratio relative to the S&P 500 Total Return Index has trended higher since 2008. It has lost momentum somewhat this year as interest in the wider stock market picked up and government bond yields rose.

It is worth pointing out that while some dividend aristocrats qualify as Autonomies, our designation is different in a number of ways. We believe that a strong record of increasing dividends is attractive but not essential. Globally oriented companies that dominate their respective niches, have strong franchises, diverse income streams and that have outgrown their respective domestic markets should create shareholder value provided the global middle class continues to expand. For example, both Google and Amazon do not pay dividends but are most certainly Autonomies. Similarly, Qualcomm has a solid record of dividend increases but does not have a sufficiently long record of increases to be considered a dividend aristocrat but it is an Autonomy.

There are three UK listed, Pound denominated, Dividend Aristocrat ETFs in the Chart Library. The SPDR S&P US Dividend Aristocrats ETF (USDV) has been mostly rangebound for the last year and is now testing the region of the 200-day MA. The SPDR S&P UK Dividend Aristocrats ETF (UKDV) remains in a consistent uptrend and is currently testing the region of the 200-day MA. The SPDR S&P Euro Dividend Aristocrats ETF (EUDV) has returned to the region of the upper side of the underlying range and the region of the 200-day MA.

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